Death and Taxes: wills and superannuation - Peter Vickers Business Group

8Jun

Death and Taxes: wills and superannuation - Peter Vickers Business Group

death and taxes, wills, superannuation, finance | 8 Jun 2016 |

As the saying goes both are inevitable. We talk a lot about taxes in this newsletter and even show ways not to make them inevitable. However we are not that clever with death. We also like to maintain our client base so discourage our clients from dying. But lets look at some stories from the last couple of years.

Wills

Writing a will is the job of the lawyer. However the accountant needs to have an input. One client had most of the shares in their family company in their spouse’s name. Thus on death there was little in the estate.

One of our clients died and because she thought that she was immortal left no will, more income for the lawyers.

A will has no effect on a superannuation fund, whether an SMSF or other fund. Thus if you have complex or blended family issues you need to take similar action in respect of the super fund as you have in your will.

We had one case where dad left his estate to mum and the 3 kids in equal shares. Sounds fair but mum could not live off the income of one quarter of the assets. We thus had to tell the kids (adults in middle age) that they could not get their distribution unless they wanted mum to starve. They thus waited.

Had one autocratic client who set up a life interest in the income of the estate with the kids getting the remainder on the second wife’s death. The widow is expected to have a further 30 years of life and the accountancy fees for the estate will thus last 30 years.

Many people now move around the world and thus have assets in various countries so
probate may need to be obtained in each country. Remember there is still at least one country where the wealth goes automatically to the eldest son and not the wife. Before the birth of a great grandchild one parliament had to change the law just in case it was a girl so the girl might inherit. It was a boy anyway and granny just turned 90.

Superannuation

Super is about saving tax. Thus the aim is to keep your wealth in a super fund as long as possible. Making a pension reversionary to a spouse stops the wealth coming out of the fund too early.

However if the last of the couple sees their accountant turn up at the hospice then the end is very close. The kids want the money out of the super fund so they do not pay an extra 17% in tax.

In complex families you need to consider who are the trustees or directors of the trustee company and is there a need for binding death nominations.

Industry and retail super funds have public service types as trustees. Trustees are not permitted to have their exercise of decision making influenced in any way. However persons in this type of position are seriously adverse to making decisions. Thus binding death benefit nominations must be considered as they are take the responsibility from the trustee. Some of the wealth could go to the kids and be taxed at 17% instead of zero to the spouse.

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